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ACH return codes are generated when an ACH (Automated Clearing House) payment fails to process and therefore gets returned. ACH payments, which essentially transfer funds between financial institutions, can be a huge convenience. They allow you to set up automatic monthly bill pay and receive direct deposit of one’s paycheck, for instance. There are, however, likely to be times when a transaction doesn’t work as expected, perhaps due to incorrect coding or insufficient funds. ACH return codes indicate exactly what went wrong.

Here, you’ll learn about what ACH return codes are and what steps you can take to help complete this kind of banking transaction, especially if you are managing a business that relies upon them.

What Are ACH Return Codes?

First, know that ACH refers to the Automated Clearing House, a U.S. financial network that provides electronic transfers among banks and credit unions. If you receive your paycheck by direct deposit or set up bill pay from your checking account, you are using the ACH system. It’s considered a fast, secure, and simple way to move money.

ACH returns occur when an ACH payment can’t be completed.

There are a few reasons why these transactions aren’t successful, including:

•   The originator (the entity who requested payment) provided inaccurate or incomplete payment information or data.

•   The originator isn’t authorized to debit the client’s account with an ACH payment.

•   There aren’t sufficient funds to complete the transaction.

The ACH return code alerts the parties involved so they know there’s an issue, whether a recurring automatic bill pay suddenly stopped or a one-time payment could not go through. The specific reason can then help the situation be remedied so the payment can hopefully be sent again properly.

Here’s an example to clarify this concept: Perhaps your wifi provider is authorized to withdraw payment monthly from your checking account. If the Originating Depository Financial Institution (ODFI; the wifi provider’s bank) or the Receiving Depository Financial Institution (RDFI; the entity receiving the payment request; aka your bank) isn’t able to transfer funds, a return code will be generated to explain exactly why the transaction wasn’t completed.

How ACH Returns Work

If an ACH payment can’t be completed, as mentioned above, a specific return code will be generated. The person or business originating the payment request can then work to resolve the issue.

A few details to note about how ACH returns work:

•   If an ACH return occurs due to insufficient funds, the consumer may be on the hook for an ACH return charge. It’s similar to when a check bounces; the end user pays a small fee; in this case, usually $2 to $5.

•   Timing-wise, most ACH returns only take about two banking days, though a few of these ACH codes involve transactions that can take up to 60 days to process.

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Common ACH Return Codes

There are 85 distinct ACH return codes. Here, you’ll learn about some of the most common ones. These return codes are typically received by the entity requesting payment and their bank.

Code: R01
Meaning: Insufficient funds (the account’s available balance isn’t sufficient to cover the funds transfer, similar to being in overdraft)
What to do: The entity requesting payment can attempt the transaction again as a new transaction within 30 days of the original authorization date (up to two times), or contact the customer for an alternate payment method.

Code: R02
Meaning: Account closed (a once-active account has been closed).
What to do: The entity requesting payment can ask the customer to correct their account information or provide a different bank account or form of payment to complete the transaction.

Code: R03
Meaning: No account exists or unable to locate account (even though the account number structure is valid, it doesn’t pass the check digit validation).
What to do: The request’s originator should contact the customer to confirm their routing number, bank account number, and the name on the bank account. If this information differs from what was originally entered, they can submit a new payment with these new details. Or request another form of payment.

Code: R04
Meaning: Invalid account number.
What to do: The entity requesting payment should check the account number, and retry the transaction. Or obtain the correct bank account number and submit a new payment with that account number.

Code: R05
Meaning: This transaction should have been processed as a consumer, not corporate, transaction.
What to do: The request’s originator should check that you have used the right codes. They can contact the customer and ask for a new form of payment. In some cases, they may need to file an appeal with Nacha (the non-profit organization that manages the ACH network) for this kind of returned transaction.

Code: R06
Meaning: Returned at ODFI’s request (ODFI requested that the RDFI return the ACH entry), often because the transaction is believed to be fraudulent.
What to do: The entity seeking payment should contact the ODFI to understand why the transaction was rejected, and then, depending on the response, resubmit or alter the request.

Code: R07
Meaning: The previous authorization for an ACH transaction was revoked by the customer.
What to do: The originator of the request should suspend recurring payment schedules entered for this specific bank account to prevent additional transactions from being returned. Then they need to address the issue with the customer, and try to resolve the issue by getting a new form of payment or asking to debit a different bank account.

Code: R08
Meaning: The customer has issued a stop payment on the item.
What to do: The entity requesting funds should contact the customer to resolve the issue, and then re-enter the returned transaction again with proper authorization from the customer. Or request a new form of payment.

Code: R09
Meaning: Due to uncollected funds, the originator can’t access enough money to cover the transaction.
What to do: The originator should try the transaction again, and re-enter it as a new one within 30 days of the original authorization date (up to two times in 60 days).

Code: R10
Meaning: The customer advised this transaction is not authorized or is improper in some way.
What to do: The entity requesting payment should check the details and authorization on the transaction to determine if an error was made. They can connect with the customer to determine why this code was triggered. If the details can be rectified, they can resubmit the transaction per ACH guidelines.

Code: R11
Meaning: An electronic check deposit was not executed correctly.
What to do: The originator of the request can correct the underlying error and resubmit the corrected electronic deposit within 60 calendar days.

Code: R12
Meaning: The branch where the account is held was sold to another DFI (development financial institution).
What to do: The entity making the request should obtain the customer’s new routing and bank account information, and submit a new transaction.

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More ACH Return Codes

The following ACH return codes are less common than those mentioned previously, but still occur and are worth knowing. Here’s a look at what makes these codes tick:

Code: R13
Meaning: Invalid routing number provided.
What to do: The request’s originator should get the correct routing number from the customer to use when resubmitting the request.

Code: R14
Meaning: The account was being managed by someone who is now deceased or can no longer continue overseeing the account (such as an account held for a minor or an incapacitated person).
What to do: This is handled on a case-by-case basis; the request’s originator might try to contact the beneficiary or new representative for the account.

Code: R15
Meaning: Beneficiary or account holder is deceased.
What to do: No further action can typically be taken.

Code: R16
Meaning: Account is frozen and funds are unavailable.
What to do: The entity making the request should obtain a new payment form.

Code: R17
Meaning: Known as a “file record edit criteria” code, this indicates that there is a discrepancy in the file code, and the transaction cannot be processed.
What to do: The fields causing the processing error need to be identified (typically by the originator of the request) in the addenda record information field of the return to complete the transaction.

Code: R20
Meaning: The receiving account is not a transaction account (aka, it’s an account against which transactions are prohibited or limited).
What to do: The entity making the request can contact the customer, and request either the authorization to charge a different bank account or a new form of payment.

Code: R21
Meaning: The ACH file contains an invalid or incorrect company identification number.
What to do: The originator of the request should double-check their information, or contact the company to obtain the correct information.

Code: R22
Meaning: The individual ID number is invalid.
What to do: The entity making the request should check their information and resubmit, or contact the customer to obtain the correct information.

Code: R23
Meaning: The account holder or their bank is refusing to accept the transaction.
What to do: The originator of the request can work with the customer to clear up the issue, or ask them to contact their bank to resolve it.

Code: R24
Meaning: Duplicate entry.
What to do: If the transaction is indeed a duplicate, there’s nothing else to do. If it isn’t, the entity making the request can contact their customer or their customer’s bank to resolve the error.

Code: R29
Meaning: The customer has notified their bank that the requesting entity is not authorized to conduct this transaction.
What to do: The originator of the request should suspend recurring payment schedules, and then address the issue with the customer. For instance, they could request new payment information from the customer or ask them to contact their bank to authorize the payment.

Code: R31
Meaning: This indicates that the receiving bank is requesting to return a certain kind of ACH transaction (a CCD, or cash concentration disbursement, and CTX, or corporate trade exchange, only).
What to do: The entity making the request can reach out to their customer to resolve this issue or request a different form of payment.

Code: R33
Meaning: There is an issue with a transaction involving a converted check (known as XCK), such as when a damaged paper check is converted to an electronic version.
What to do: The originator of the request should contact their customer for another payment form.

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The Takeaway

ACH return codes express the reason why an electronic Automated Clearing House payment could not be completed. Knowing what each code represents can help determine what the next steps should be to keep payments flowing smoothly or get refunds completed.

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FAQ

What causes an ACH return?

ACH returns occur when an Automated Clearing House payment can’t be completed, perhaps due to inaccurate or incomplete information or insufficient funds. When this happens, an ACH return code is generated, providing a reason for the return.

What is ACH return fee?

When ACH returns occur, especially due to insufficient funds, a fee can be charged. It’s similar to how a bounced check incurs a fee. The amount is generally around $2 to $5.

How long does an ACH refund take?

Typically, an ACH refund takes about five to 10 banking days to occur, though some situations can take longer to resolve..

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